How do Spanish Mortgages Work?
Spanish Mortgages are almost always tracker mortgages. They track the Euribor base rate with a fixed margin above, for the life of the mortgage.
Euribor Base rates are typically based on the 12 month Euribor rate but some Banks can offer mortgages based on the 1 month and 3 month Euribor base rate.
Can I have an interest only mortgage?
Currently, most Banks only offer capital and interest mortgages (repayment mortgages) although one bank is still offering an interest only mortgage.
The Bank offering this product are limited to interest only for the first 5 years of the mortgage term, the mortgage automatically reverts to capital and interest in year 6 for the rest of the term.
Can I have a non-status mortgage?
The standard answer is “No”.
However, in certain circumstances, Easy Mortgages Spain can obtain a non-status mortgage. This is limited to the following:-
* 50% of the price
* 120.000 euros max mortgage
* Maximum term of 20 years (to age 70yrs old)
Do I need insurance?
Most Spanish Banks will insist that you take home and life insurance with them. Without taking these insurances, most Banks will increase the mortgage interest rate or, in some cases, even refuse the mortgage.
What about repayment penalties?
The maximum early repayment penalties allowed in Spain is 0.50% during the first 5 years for full early repayment of the mortgage. This penalty must reduce to 0.25% thereafter. Partial payments are usually free.
How much can I borrow?
The amount you can borrow is defined first and foremost by your income. The amount is limited to a maximum of between 50% and 70% (subject to status) of the lower of purchase price or valuation of the property you want to buy.
Spanish Banks use a debt to income ratio to calculate affordability. They do this by taking your net monthly income (after tax) and then calculating what amount of this income is used to pay existing mortgages, loans and credit cards (expressed as a percentage).
As long as this value, including the new mortgage payment does not exceed their maximum ratio/percentages of between 30% - 50% (depending on the Bank) you should be approved.
Our in-house mortgage advisors has an intricate knowledge of this system and can easily pre-approve you free of charge from the first meeting we have.
How does the process work?
Spanish Mortgages on average take around 3 – 4 weeks from start to finish and have 4 steps in the process:-
1. Initial meeting – meet or speak with your mortgage adviser to discuss your requirements for your Spanish mortgage so they can recommend the best mortgage product(s) to meet your needs. The adviser will also usually help complete the application form to carry a pre-approval at this stage.
2. Application – submit proof of income and details of the intended property they want to purchase to the Bank or Banks to obtain an offer of mortgage which is then subject to the Bank receiving a satisfactory valuation of the property. This usually takes around 5 working days but can be more if the Bank feel they need some more documentation to support your application.
3. Valuation – once approval has been received and the client is happy with the mortgage offer, the Bank will want to send out an independent valuer from their panel. This is at a cost to the client and always involves the valuer visiting the property. This usually takes are 5 working days.
4. Completion – assuming the valuation has come back satisfactory for the Bank, they will issue a copy of the valuation report for the client and also issue a formal offer of mortgage, typically in email format although some are starting to issue an official offer document. The Bank are now ready to complete and can do so within 3 – 5 working days.
What costs are involved in setting up a Spanish Mortgage?
Spanish mortgages are not exactly cheap to set up. The fees you will need to consider in your overall budget:-